The yen, frequently viewed as a safe haven, was the main beneficiary, although the move was contained. The Japanese currency briefly rose to its highest since Jan. 8.
Health authorities around the world are racing to prevent a pandemic of the virus, which has killed more than 80 people in China. Nearly 2,800 people have been infected globally. China's National Health Commission said on Sunday that the ability of the coronavirus to spread was getting stronger.
China's cabinet announced it would extend the Lunar New Year holidays to Feb. 2 to strengthen the prevention and control of the new coronavirus, state broadcaster CCTV reported early on Monday. The holidays had been due to end on Jan. 30.
Hong Kong has also banned the entry of visitors from China's Hubei province, where the coronavirus outbreak was first reported.
"While some analysts argue the fear will be worse than reality with the coronavirus (pointing to the low mortality rate), no one is anticipating a Spanish flu repeat - the bigger worry is the economic impact of containment and quarantine strategies, particularly in China," RBC Capital Markets' global head of FX strategy Elsa Lignos said.
The offshore Chinese yuan shed 0.6pc to 6.9783 yuan per dollar, its weakest since Dec. 31.
The Australian dollar, which is heavily exposed to the performance of China's economy, dropped 0.5pc to $0.6787 , its lowest since Dec. 2. The New Zealand dollar also lost 0.5pc.
Traders said market moves could be exaggerated due to low liquidity, because financial markets in China, Hong Kong, Singapore, and Australia are closed for holidays.
The yen rose to as high as 108.73 yen but by 0830 GMT it had retraced much of its rise and was last up just 0.1pc at 109.12 yen per dollar.
Yukio Ishizuki, foreign exchange strategist at Daiwa Securities in Tokyo said the "risk-off mood is likely to continue for a while."
Moves in other currencies were contained as nervous investors focused almost solely on the virus and China.
The euro nudged up slightly to $1.1032 ahead of the latest reading of a German business sentiment indicator.
The dollar index was flat on the day at 97.857.
Sterling held at $1.3075. Positioning data last week showed investors slimming their net long position in the pound ahead of a knife-edge Bank of England decision on Thursday about whether to cut UK interest rates.